Alibaba Acquires 5.6% Stake in Groupon

Chinese e-commerce giant Alibaba Group has acquired 33 million shares in online deals website Groupon, making it the fourth largest shareholder.

Revealed in a regulatory filing on Friday (February 12) the investment accounts for a 5.6% stake of Chicago-based Groupon since December 31, made as part of Alibaba’s expansion strategy, alongside newly-gained shares in online retailer Jet.com, augmented reality provider Magic Leap and car-booking company Lyft.

“The purchases are part of the Chinese company’s strategy to learn more about the US market as it expands internationally,” said Gil Luria, analyst at Wedbush Securities.

"They don’t want to have their own operations, so they are investing in other companies to help them learn and pave the way for more robust activity down the road."

Unaware of the stake until Friday, a spokesperson for Groupon said the company was “pleased” with the news, given Alibaba’s reputation as a ‘long-term holder’.

Rocky road

Groupon has suffered an 86% decline in value since its IPO in 2011, but Friday’s announcement came just hours after the discount site revealed its strongest financial results in four years.

Reported last Thursday, Groupon’s Q4 results surpassed analyst expectations with profit of four cents a share, while analysts predicted a break-even quarter. Total revenue for the period came in at $917.2 million, against a predicted $845.9 million.

But despite gains on Friday Groupon’s share prices are still down 61% over the past 12 months; CEO Rich Williams has called stock “undervalued”, while downplaying any speculation that the company is looking to make a deal.

“The reality is we have a lot of work to do,” said Williams in an interview with Bloomberg.

“Our focus as a team just isn’t on things like acquisitions, or being acquired. Our focus is on building a great business,” added Williams.

Despite exiting 17 countries, capping operations to within the borders of 28 markets, Williams adds that Groupon feels "pretty good” about its global footprint, but adds that it will continue to evaluate it opportunistically.